Morning Brew March 16 2022
Senior Relationship Manager
Summary: Equities Risk On ahead of the FOMC supported by China hopes.
Comments by the Vice Primier of China cause a surge in Chinese Equities and overall risk on in equities. Hopes are the Chinese government will take steps to support the economy in the recent corona spike.
At the same time Ukranian President Zelenskiy is calling peace talks more realistic, US President Biden will attend the NATO Summit
It is not fully clear acc to Reuters if Russia defaulted on it`s debt. There is a grace period until April 15.
Today the US Retail sales will be released at 13:30 CET and the FOMC Rate decision will be released at 19:00, followed by the press conference at 19:30.
Expectation has shifted a little since Monday, futures now indicate a 87% probability for a 25 BSP hike and 13 for 50, Monday the split was 93/7. Our Steen Jacobsen expects a clear message that the Fed sees 75 BPS hikes required until after the May 4 meeting. So if there are only 25 BPS today, Powell will strongly hint at 50 BPS in May.
Indexes gained yesterday as the PPI came a little lower than feared and over night could record further gains.
Hong Kong is up almost 10%, the US500 2.7% and Dax 1.88.
US 10 year yields remain high at 2.19, the USD Index falls to 98.8. EURUSD is just below the 1.10 level at 1.0965 and GBPUSD at 1.3043. Gold and Silver 1915 and 24.80.
Remain extremely cautious in all directions today as markets should be news driven and very nervous.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.